Labor

Portland businesses worried about city’s new minimum wage ordinance

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Portland voters approved Question A on their local ballots last week, an initiative opposed by the city’s mayor and most of the city council that significantly increases the local minimum wage. Small business owners are already worried about the economic harm the initiative will cause to their business and their employees’ livelihoods.

The measure boosts Portland’s minimum wage to $15 an hour over a three year period starting in 2022. The city’s current minimum wage of $12 an hour will increase to $13 in 2022, and increase by one dollar annually until 2024 when the minimum wage reaches $15 an hour.

Starting on January 1, 2025 and each year thereafter, the minimum wage must increase with the cost of living. The measure requires the city’s tip credit to be half of the minimum wage established by the initiative, meaning restaurants and other service businesses will be required to increase the base wage they pay to tipped employees. It also requires an enhanced minimum wage of time-and-a-half hazard pay during emergency proclamations.

Suzanne Foley-Ferguson, who has owned Beal’s Old Fashioned Ice Cream on Veranda Street in Portland for 10 years, took to social media to explain the economic realities of the initiative.

“Because Portland voted to increase the minimum wage…I have a lot of thinking to do; as I am sure others in the SMALL business community do,” she wrote on the Beal’s Ice Cream Portland Facebook page. “As a small business owner who employs 14-18 year olds, I can tell you that I CANNOT pay them $15-22 per hour!”

Moving ahead, Foley-Ferguson says she will not hire anyone under the age of 18 because the training and supervision required will force her labor costs to balloon to around $36 per hour under the new minimum wage ordinance. She also suggests that, since she won’t be able to find people over the age of 18 who are willing to scoop ice cream, her shop will only be open two to four hours per day in which she works alone.

The full Beal’s Old Fashioned Ice Cream Facebook post can be read here:

Craig Allaire, operations manager at the Portland House of Pizza, told WMTW that the business is looking ahead to what kind of adjustments they can make to offset the higher payroll costs coming down the road.

“You raise prices, and you do cut hours,” Allaire said. “In the same token, it’s not really benefitting anybody. Ok, great. You’re making $18 an hour now, but I’m charging you $17 for a cheese pizza.”

Unfortunately for small businesses in Portland, the initiative cannot be tweaked by the Portland City Council for five years. Fortunately, though, the initiative does not take effect until 2022, meaning neither the city’s minimum wage, nor the wage required to be paid during times of emergency, kicks in until January 1, 2022.

Many expected that, if passed, the initiative would require the time-and-a-half hazard pay provision to kick in this year amidst the COVID-19 pandemic and statewide emergency declaration issued by Gov. Janet Mills. However, Portland Mayor Kate Snyder announced on Nov. 10 that the city will not begin enforcing the ordinance until 2022.

“We were advised in executive session about the legal implications and risks for various options for moving forward. Ultimately the council advised staff to enforce the minimum wage ordinance under the plain language which indicates it will take place in January 2022,” Snyder told the Press Herald.

To be clear, the language of the initiative states that the emergency wage is equivalent to 1.5 times the regular minimum wage established by subsection b of the ordinance. Subsection b of the ordinance outlines the $1 annual increases to the minimum wage starting in 2022. Therefore, since the emergency wage is dependent on the minimum wage as set by the ordinance (which doesn’t take effect until 2022), the city has determined that the emergency wage also does not take effect until 2022.

While this may give small business owners in Portland more time to plan for the new minimum wage, it changes nothing about the economic reality of the situation.

When wages rise artificially due to an increase in the minimum wage, payroll costs on businesses increase without compensating growth in productivity or sales. With a majority of businesses operating on razor-thin profit margins, particularly amidst the economic restrictions in place during the coronavirus pandemic, Portland’s new minimum wage gives small businesses no choice but to reduce their operations, lay off workers, transition to automation or relocate to another jurisdiction.

As exhibited by the comments of the owners and operators of Beal’s Ice Cream and the Portland House of Pizza, when minimum wage hikes drive businesses to reduce costs, the first victims are low-wage, low-skill workers; the same people who minimum wage laws are supposed to help.

About Jacob Posik

Jacob Posik, of Turner, is the director of communications at Maine Policy Institute and the editor of The Maine Wire. He formerly served as a policy analyst at Maine Policy. Posik can be reached at jposik@mainepolicy.org.

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